Cover Story: Information Technology Annual Report
If Chief Executive Scott McNealy had gotten his way back in 1987, Sun Microsystems Inc. would never have purchased the mainframe computer that still runs its manufacturing. As the booming workstation maker outgrew its minicomputer systems from Hewlett-Packard Co., McNealy insisted the company should "run Sun on Sun." If Sun did everything strictly on a network of its own workstations and servers, he reckoned, it would prove that customers could do the same. But he lost: The board outvoted him 11 to 1 and went with Amdahl mainframes.
McNealy has finally prevailed: His dream of running a multibillion-dollar business entirely on a network is about to come true. Two years ago, Sun shoved its mainframe out the door, hiring Computer Sciences Corp. to haul it away to a CSC computer center in San Diego. Now, Sun is ready to cut the connection altogether. Vows McNealy: "Early next year, we're pulling the plug."
It will be little more than a formality. Thanks to advances in the powers of Sun's workstations, servers, and the software that binds them, the company is already living by its trademarked corporate slogan: "The network is the computer." The lone mainframe is merely one of 230 servers feeding 22,000 workstations on the Sun network. And it's already a persuasive sales tool. Says Dennis W. Walsh, chief information officer at Entergy Corp., a $6 billion utility in New Orleans, which is running everything but its billing system on a network of Sun computers: "You can go there and see it working."
SURPRISE. Warts and all. Even the self-proclaimed leader of networked computing has had to deal with the issues facing thousands of other businesses trying to live on a network. Delays, missteps, and internal resistance have added years and millions of dollars to the process, Sun concedes. Surprise No.1, says William J. Raduchel, Sun's vice-president for corporate planning and development: The biggest obstacle isn't technology, but people. Even Harris Kern and Randy Johnson, the managers charged with carrying out the transition, didn't believe it could be done. Nor did Sun's engineers, who resented having to adopt mainframe safety measures such as regular data backups and using standardized software. Only after years of negotiation and system outages were they convinced that central coordination was a must.
The next problem: Off-the-shelf software to run critical operations on a global network, and share data simply didn't exist. So Sun painstakingly had to write its own. SunDANS, for instance, zaps new applications across the network to the individual machines where they are needed. Now a new application is up in a day, instead of the weeks or months it took with the mainframe. Another program, Sun Paperless Reporter, automatically distributes data in easy-to-read report form, saving millions of printed pages a year.
All this networking is already reflected in Sun's bottom line. For instance, since managers now have faster access to inventory and order data, Sun takes only 135 days to log revenue from the time an order is taken, down from 275 days in 1989. That has helped generate some $700 million in cash. Sun's earnings are expected to jump about 80%, to $350 million, on a 26% increase in sales, to $5.9 billion, in the fiscal year ending June 30.
Sun is far from done with its network, however. An early developer and user of the Internet, it's adopting the Net's World Wide Web format to make company data more easily available. Employees can simply click on a word or phrase, and they're instantly connected to more detailed information on that subject. And Sun is at the forefront of using the Net for electronic commerce--forging digital links with suppliers, resellers, customers, and software companies. Raduchel is also setting up a Web server for the chief information officers of Sun's top 10 customers to exchange tips. Says Raduchel: "We're moving from a computing castle to a computing community."
PROMISES KEPT. The toughest transition, though, still looms--moving manufacturing support off the mainframe and onto the network. Sun had hoped to unplug the mainframe last year. But Oracle Corp. was late with its customized networked program for manufacturing resource planning. Also, to ease transition to the network, Sun decided first to simplify its manufacturing operation by consolidating distribution warehouses, reducing its supplier list, and farming out packaging and delivery. With the reorganization mostly complete, Sun hopes to move the last manufacturing operations off the mainframe by February in the U.S. and by August, 1996, elsewhere. By then, it will be able to make production changes daily or even hourly instead of biweekly, says John C. Shoemaker, vice-president for worldwide operations. The final step, due to start in August, is a data-sharing scheme that will end the need to write complex middleware software between every program. Sun will "broadcast" every key transaction over the network, and each operation will receive only the data it needs, translated automatically for their programs.
Network computing hasn't been nirvana. It often requires spending more on computer equipment and staff in each location. "At the end of the day, this might not be cheaper than mainframe computing," says Sun Controller George Reyes. But there's the benefit of increased overall efficiency (chart, page 102).
Perhaps more valuable, the network has become Sun's chief selling tool. Says James Stikeleather, a partner with Tampa computer consultant Technical Resource Connection: "They've been able to do what they promised." Indeed, Sun has literally written the book on networked computing: Rightsizing the New Enterprise, by Kern and Johnson. Now, Sun has to keep living up to its claims.